Before the advent of a distributed domain name system; networked computers used local files to map hostnames to IP addresses. On Unix systems this file was named /etc/hosts or “the hosts file”. In those days, networks were small and managing a file with a handful of hosts was easy. However as the networks grew so did the methods of mapping hostnames and IP addresses.
In modern days with the internet totaling at somewhere around 246 million domain names (as of 2012) the hosts file has been replaced with a more scalable distributed DNS service.